Global Bond Yields Climb Due to Inflation Fears

By Miriam Mukuru

Yields on U.S., U.K., and eurozone government bonds jumped to their highest level this month on Tuesday as lack of progress in U.S.-Iran peace negotiations drove up oil prices and caused inflation worries to resurface.

Brent crude rose 2.6% to $89.99 per barrel and is around 13% higher than the level a week ago.

Developments in the Middle East are the main drivers of global sovereign bond yields as traders fear the conflict could keep oil prices high and push up inflation.

President Trump on Monday unveiled new measures that involve putting economic pressure on Iran to force the nation into signing a deal to end the conflict. The announcement came after Iran demanded compensation from the U.S. for war damage.

The rise in U.S., U.K. and eurozone bond yields reverses last week's decline that followed the U.S. non-farm payrolls data. The jobs data came in weaker than expected, lowering the prospects of the Federal Reserve raising interest rates in the coming months.

However, renewed Middle East tensions have revived inflation concerns and raised the possibility of the Fed increasing rates to tackle inflation.

The rise in bond yields shows that "Friday's weak labor data is no longer enough on its own to anchor yields," Tickmill Group partner Patrick Munnelly said in a note.

Market focus is on the U.S. CPI data due to be released on Wednesday as investors assess the impact of the Middle East conflict on the economy.

"A soft inflation print could restore the post-jobs rally in bonds. A firm print, especially with higher gasoline prices feeding expectations, would validate the hawks," Munnelly said.

Nonetheless, the ongoing conflict and fading prospects of a near-term end to the war could continue weighing on bond markets, analysts said.

"A soft CPI can still help tactically, but the question is whether it will be enough to fully offset energy and supply pressure ahead of September," Mizuho multi-asset strategist Evelyne Gomez-Liechti said in a note.

U.K. bond investors face inflation concerns as well as fiscal uncertainty ahead of the budget statement in October. Markets await the first estimate of second-quarter GDP data set to be released on Thursday for clues on the state of the U.K. economy.

Gilt yields could remain elevated unless the quarterly GDP data is notably weaker than expected, which could cause traders to cut back their expectations of Bank of England interest-rate rises.

Investors fully price in one quarter-point rise in interest rates by the Bank of England in 2026, and a 19% probability of a second rate increase by year end, LSEG data show.

Ten-year gilt yields hit an 11-day high of 5.049% while 10-year U.S. Treasury yields climbed to 4.735%, the highest since July 31, Tradeweb data show. Ten-year Bund yields advanced to 3.204%, a nine-day high.

Write to Miriam Mukuru at miriam.mukuru@wsj.com

(END) Dow Jones Newswires

August 11, 2026 06:19 ET (10:19 GMT)